Freshfields Lecture.doc

50 friedrich von hayek the road to serfdom 1944 p72

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50 Friedrich von Hayek, The Road to Serfdom (1944), p.72 . See generally Max Weber, General Economic History (F. Knight trans. 1966); Detlev F. Vagts, Dispute Resolution Mechanism in International Business , 203 Recueil des Cours (Hague Academy) (1987), p. 19. 14
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uninformed by any existing litigation strategy. 52 In other words, they should not be created in function of what might be called the ‘ouch test’, which looks to see who gets hurt by a particular rule. 53 The image of this ‘veil of ignorance’ helps explain the difference between an arbitrator who aspires to interpret pre-existing norms, and one who establishes procedures after receiving indications of how one model or another will likely affect the outcome of the case. 54 VI. COSTS AND BENEFITS OF INNOVATION A. Ex Ante and Ex Post Rule-Making Of course, none of these questions about the tension between discretion and rules is unique to arbitration. Most of what we call law involves a continuum between generality and precision. To prevent dangerous driving, one might either (i) set defined speed limits, such as a prohibition on travel above 65 miles per hour, or in the alternative (ii) declare it unlawful to drive at ‘unreasonable’ speeds. 55 The first approach (which might be called ex ante rule-making) establishes precise rules of conduct before the controverted event, while under the second approach ( ex post rule-making) a judge or arbitrator fixes the precise contours of behaviour only after the relevant incident. At present, most arbitration frameworks follow the latter approach, mandating only ‘reasonable’ and ‘appropriate’ procedures. In order to warrant a change from the reasonableness standard to more precise ex ante rules, some hope must exist that an ex ante approach would meet a perceived need among litigants. 56 In economic terms, the argument might be made that if a need for more specific rules did exist, the market by now would have reacted. So if it ain’t broke, don’t fix it. 57 51 See John Rawls, A Theory of Justice (1971), § 24, p. 136. Rawls affirmed inter alia that ‘justice is the first virtue of social institution’. 52 Rawls’s notion of pure justice, of course, goes further, and suggests that those agreeing to particular principles should also be ignorant of their place in society, intelligence and strength. 53 On some matters the ‘veil of ignorance’ already finds limited recognition in arbitration. For example, although different methods exist to calculate arbitrators’ fees (ICC looks to the amount in dispute, while AAA and LCIA base fees on time spent), no institution gives an arbitrator discretion to opt for one approach or the other ( ad valorem or hourly) after seeing how the case develops. 54 Similar principles obtain with respect to the substantive law applied to the merits of the dispute, where most business managers seek predictability in normal commercial relations. As the late Dr. Francis Mann noted, ‘No merchant of any experience would ever be prepared to submit to the unforeseeable
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